CASH MANAGEMENT STUDY TOUR

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CASH MANAGEMENT STUDY TOUR

• VILNIUS LITHUANIA
• 15-16 FEBRUARY
• PRESENTED BY NIKOLA VUKICEVIC
• DEPUTY MINISTER FOR BUDGET
• REPUBLIC OF MONTENEGRO

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ORGANIZATIONS INVOLVED

• MINISTRY OF FINANCE REPUBLIC OF MONTENEGRO
• STATE TREASURY DEPARTMENT MINISTRY OF FINANCE
  LITHUANIA
• US DEPARTMENT OF THE TREASURY OFFICE OF TECHNICAL
  ASSISTANCE

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REFORM OF PUBLIC FINANCE IN LITHUANIA
INTRODUCTION

• LEGAL FRAMEWORK
• Organic Budget Law
• Strategic Planning Methodology
• Government Resolution on Budgeting, Calendar, etc.

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PRINCIPLES OF REFORM

• UNITY
• SPECIFICATION
• TRANSPARENCY
• SOUND FINANCIAL MANAGEMENT

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UNITY

• CONSOLIDATION OF NON BUDGETARY FUNDS
• Five included, four still EBF
• TAXES AND OTHER INCOMES ARE REDISTRIBUDET THROUGH
  CONSOLIDATED NATIONAL BUDGET, SOCIAL AND HEALTH
  INSURANCE FUND

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TRANSPARENCY

• ADDITIONAL INFORMATION TO THE PARLIAMENT, LEADING
  ANNUAL DRAFT BUDGET
• Programmes to be executed
• Investment projects to be implemented
• Performance information
• Information available on the internet

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SPECIFICATION

• ISSUE - APPROPRIATION MUST HAVE A GIVEN PURPOSE
  AND BE LINKED TO SPECIFIC OBJECTIVE
• SOLUTION - IMPLEMENTED BY STRATEGIC ACTIVITY
  PLANNING SYSTEM

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SOUND FINANCIAL MANAGEMENT

• IMPLEMENTATION THROUGH CREATION OF STRATEGIC
  PLANNING SYSTEM
• Governmental Level
• Institutional Level Spending units
• Based on Budget Routine Process

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BUDGET INSTITUTIONS STRATEGIC ACTIVITY PLAN

• GOVERNMENT DEFINES STRATEGIC GOALS AND PROGRAMS
  FOR LINE MINISTRIES
• LINE MINISTRIES DEFINE SPECIFIC TASKS AND
  INDICATORS

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STRATEGIC PLANNING 1

• First step in annual budget cycle budget
  priority setting for mid-term period
• Sector strategies for investment based on budget
  priorities
• Fiscal plan expenditure targets based on budget
  priorities
• Linking ministerial strategic action plan to
  priorities
• Linking inter ministerial programs to priorities
• Linking measures inside ministerial programs to
  priorities

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STRATEGIC PLANNING 2

• Principal framework for the hierarchy of
  strategies of different duration (15, 7 and 3
  years)
• Harmonisation of investment planning and
  strategic activity plans (budget programmes)
• Harmonisation of EU planning instruments with
  investment planning and budget

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IT SYSTEM FOR BUDGET EXECUTION

• IT SYSTEM FOR AUTOMATED FORECASTING OF BUDGET
  EXPENDITURE
• More accurate forecasts of budget expenditure
• Forecasts of expenditures for borrowing and
  investment planning
• More accurate data less balance kept in
  accounts for unexpected expenditures
• Lower interest expenses

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MONTENEGRO - HIGHLIGHTS

• ORGANIC BUDGET LAW - 2001
• TREASURY IMPLEMENTED 2002
• SAP SYSTEM FOR BUDGET EXECUTION IMPLEMENTED IN
  2003
• PROGRAM BUDGETING STARTED IN 2004 ONGOING
  PROCESS
• HOME MADE SOFTWARE FOR BUDGET PLANNING 2005
• CAPITAL BUDGET IMPLEMENTED - 2007

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APPLICABILITY TO MONTENEGRO

• UNITY
• Inclusion of all EB Funds in TSA from 2008
• SPECIFICATION
• Program Budgeting improvement spending units
  takes more responsibility for formulation of
  performance indicators
• Redefinition of Program Structure

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APPLICABILITY TO MONTENEGRO cont

• TRANSPARENCY
• Budget Rationale better presented by functional
  classification
• SOUND FINANCIAL MANAGEMENT
• Government Responsibility in definition of Sector
  Strategies

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APPLICABILITY TO MONTENEGRO cont

• FORECASTING PROCESS
• Assigning responsibilities to spending units in
  process of budget execution

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MONTENEGRO NEXT STEPS

• EB funds in TSA 2008
• Improvement of implementation of Program
  budgeting based on experience of Lithuanian case
  and other countries
• Medium Term Budgeting Framework explore
  possibilities for multiyear budgets
• Ceilings for spending units for three year period

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MONTENEGRO NEXT STEPS cont

• Unification of all spending units through SAP
  system
• Unification of all spending units through Budget
  Planner system and connection with SAP
• Improving municipality reports on public
  expenditures
• Improving Public enterprises reports on assets
  and liabilities

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KNOWLEDGE GAINED

• Role of well-established principles in budgetary
  reform
• Quality of IT system in cash management process
• Innovative methods for budget execution forecasts
• Advantages of combination of both top down and
  bottom up principles in public finance management

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THANK YOU